Hillary’s State Department Changes: Two Comments

As Mark observes, it’s a good thing that Hillary Clinton has appointed Jack Lew as budget director within the State Department. Two other things emerge from the NYT piece, one good, one bad:

1) Clinton seems to want to get State more involved in international economic affairs. This is good. Matt Yglesias is worried about this, suggesting that “letting the Treasury lead on this worked fine during the Clinton administration and insofar as it hasn’t worked under Bush it’s been because his Treasury Secretaries have been unimpressive and subcabinet jobs have often lingered vacant for long periods of time.”

I think that this is strongly open to doubt. Joseph Stiglitz’ takedown of Treasury’s blindness during the 1990’s on international economic affairs has been answered, but not very effectively. Brad DeLong, here, seems to think Rogoff gets the better of the argument, but in my view, he misrepresents the position of Stiglitz, who never argues that debt-laden countries should print more money: he simply argues that in countries without inflationary pressures should not be required to raise interest rates in order to avoid currency speculation: instead, the solution should not be insisting on international capital market liberalization–a position that the Fund has seemingly accepted now. Thomas Dawson of the IMF castigates Stiglitz for his attacks on the IMF, and then mentions offhand that the Fund has now changed its policies to look more like what Stiglitz wanted.

Bottom line: I’m not persuaded that leaving international economic affairs in the hands of the Treasury is necessarily the best policy. As a non-economist, I could be persuaded otherwise.

2) Note that although State appears to be ramping up on a variety of levels, climate change does not appear to be one of them. That brief will continue to be buried at Foggy Bottom, once again suggesting that perhaps USTR is the best place to put it. I don’t know much about Ron Kirk, Obama’s USTR selection: as a Texas Democrat, he doesn’t figure to be overly concerned with carbon emissions. But it would at least be more high-profile.